Ant, Tencent’s Online Payment Services Are in Central Bank Crosshairs

Photo: Bloomberg

(Bloomberg) — China proposed measures to curb market concentration in its $9.23 trillion online payments market, potentially dealing another blow to financial technology giant Ant Group Co. and its biggest rival Tencent Holdings Ltd.

Any nonbank payment company with half of the market in online transactions or two entities with a combined two-thirds share could be subject to antitrust probes, according to draft rules released Wednesday by the People’s Bank of China (PBOC).

Mobile payments have become the most important online transactions platforms in China. Alipay, the app operated by Ant, held 55.6% of the mobile payments market as of the second quarter last year, according to internet consultant iResearch. Tencent had a 38.8% share.

The rules set out the strongest and most detailed message yet of regulators’ plans to curb monopolistic practices in the industry. Ubiquitous in China, Ant and Tencent have transformed how consumers shop through mobile apps that are used 1 billion people.

“This shows there’s no letup in regulatory tightening on the sprawling fintech businesses,” said Dong Ximiao, a researcher at Zhongguancun Internet Finance Institute.

If a monopoly is confirmed, the central bank can suggest that the cabinet impose restrictive measures including breaking up the entity by business type. Businesses that already have payment licenses would have a one-year grace period to comply with the new rules, the PBOC said.

The regulator also vowed “comprehensive” oversight of companies in the space and their transactions with affiliated parties. It will step up supervision of any changes to shareholders or beneficiaries at payment companies, it said.

Regulators shocked markets in November by suspending billionaire Jack Ma’s record initial public offering of Ant as they stepped up oversight. Ant has since been ordered to overhaul its business, and an antitrust investigation was launched into affiliate Alibaba Group Holding Ltd.

While it has stopped short of directly asking for a breakup of Ant, the central bank has stressed that the company needs to “understand the necessity of overhauling” its business and come up with a timetable as soon as possible.

Ma emerged in public Wednesday for the first time since China began clamping down on his businesses, ending several months of speculation over his whereabouts. He appeared at an online education conference. Global investors are still seeking clarity on what the future holds for the world’s largest fintech company.

Room for growth in online payments is limited after years of head-to-head rivalry between Ant and Tencent’s WeChat Pay. Total transactions were 59.8 trillion yuan ($9.23 trillion) as of June 30, up 8.8% from a year earlier, according to iResearch. That’s sharply down from increases of 23% during the same period in 2019 and 65% in the 2018 period.

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